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Types of personal loans for bad credit in Canada

When it comes to sources of financing, options can feel limited for people with less-than-ideal credit scores. However, that’s not the case if you own an asset or are a homeowner. As we highlight different kinds of personal loans for bad credit in Canada, you’ll find an option that works for you and your financial situation.

Understanding credit scores and loans  

In Canada, each person’s creditworthiness is represented by a score between 300 and 900; the higher the score, the more reliable (or credit-worthy) lenders find you. Nonetheless, your credit score is important when applying for loans, like buying a home or a renovation loan. Traditional lenders and credit unions prefer lending to people who have a good credit report, which includes scores of 650 or greater. You are more likely to be approved, and you’ll most likely get better offers.

A couple looking at their tablet in their home.

What is a bad credit loan?

Most lenders prefer borrowers with higher credit scores, but those with bad credit still have other financing opportunities. Bad credit loans aren’t a type of loan but rather are a loan option available for people with less-than-ideal credit scores.  

To get a loan with bad credit, you apply for one, once approved, you receive the proceeds of your loan, and repay the principal and interest over time. They usually come from private or alternative lenders, and the two main types of loans for bad credit are unsecured and secured.


To get an unsecured loan means to borrow money without providing collateral, so getting approved depends mostly on your financial background. The most common type of loan is an unsecured loan, and some examples include payday loans or student loans.   

Since unsecured loans do not require you to provide collateral, their offers may not be ideal for those with bad credit. Some unsecured loans can reach interest rates up to 60%, and you may not be able to access more than $50,000.  


In contrast to unsecured loans, secured loans involve an asset that the borrower offers as collateral. They allow those with poor credit to borrow by allowing them to guarantee their repayment through something they already own.   

The value of secured loans usually depends on the value of the asset the borrower is offering. Lenders see secured loans as less risky than unsecured loans, so the requirements are more manageable, and borrowers may receive a more substantial loan.  

Secured bad credit loans in Canada   

Secured loans are supported by one of your assets, with some of the more common ones being your car or your property.   

Vehicle title loans  

If you own a car and are seeking additional financial support, some lenders will provide financing based on the value of your car. By offering your car as collateral, you guarantee you will repay the loan or, the vehicle can be taken back to provide the lender an asset to repay the loan.  

Vehicle title loans are an accessible way to get loans at a moment’s notice, but they can have rates as high as unsecured loans. They may also have additional fees that other secured loans don’t, and some lenders could conduct credit checks.

Home equity lines of credit (HELOC)

A HELOC is a revolving loan with a purchasing limit of up to 65% of your home value. You can borrow as often and as much as you need if you remain under the credit limit.   

HELOCs allow you to make monthly interest-only payments to repay the principal when your financial situation is more ideal. Some people pay only the interest for that month because HELOCs usually come with variable rates. 

HELOCs are a good option for people who aren’t sure how much they’ll need. A flexible line of credit gives borrowers the allowance and time to cover their major purchases.

Home equity loans  

If you prefer to receive a secured lump sum, consider applying for a home equity loan. The loan’s value depends on the equity you have built in your home.  

Home equity loans can be as much as 80% of your home’s value, which can be significantly high considering Canada’s property values. You don’t have to borrow the entire value of your home’s available equity, making a home equity loan more useful for people who have a clearer idea of how much they want to budget for their goals. 

Once you receive the loan, you repay it with interest the following month. Home equity loans usually have fixed rates, making each payment predictable regardless of the economic environment.

Places that offer secured loans for bad credit 

Depending on the type of secured loan you choose, you may be able to qualify for it at different lenders according to their offers and requirements.  

  • Major financial institutions—some banks offer HELOCs and home equity loans but will still require steady employment or income or a good credit score. Remember that the application process takes longer than that of alternative lenders.  
  • Credit unions—if you’re a member of a credit union, you could consider applying within your union, but they may conduct a background check and verify your employment status and credit history.   
  • Alternative lenders—the lenders with the most accommodating criteria are alternative lenders like Alpine Credits. Your credit score will not have as much of a role in the application and approval process, and you could receive the funds more promptly.  

Benefits of secured loans for bad credit  

A secured loan for someone who has bad credit can be more beneficial than getting an unsecured loan despite having to provide collateral. If you are getting a secured loan for bad credit from an alternative lender, you may receive some of the following advantages.  

  • Comparatively lower interest rates—compared to unsecured loans and credit cards, secured loans offer more ideal interest rates. For one, home equity loans have interest rates lower than 10%, which is less than credit card rates.   
  • Higher borrowing limit—because the value is based on the collateral item, you may be able to access a larger loan amount. Home equity loans are one example of a way you may be able to access hundreds of thousands of dollars.   
  • More flexible eligibility criteria—the most important factor of your loan approval is the value of your collateral rather than your credit score. Lenders may still look into your financial background, but it will play a less significant role in your application.  
  • Fixed monthly payments—with a fixed interest rate, you know what to expect regarding your payments. Even if rates change, you’ll continue to pay according to your original loan terms.  
  • Multipurpose—with higher values, secured loans can simultaneously provide financial support for different areas. For example, you can consolidate your outstanding balance while paying for post-secondary tuition for a family member. 

Ways you can use your secured loan 

With the immediate and substantial amount that the secured bad credit loan gives you, you can invest in improvements to your financial habits or start something new. The examples below are some of the common ways people use a bad credit loan.  

  • Loan consolidation—one of the most common reasons for getting a secured loan is to satisfy some outstanding balances and credit cards. You can save on interest because they can satisfy most or all your loans while you focus on one payment per month with one rate while improving your credit rating.   
  • Home renovations—rather than paying for renovation costs with your credit card or spending time saving up, secured loans can cover the expenses. Secured loans have lower interest than credit cards, giving you funding more quickly.   
  • Business investments—if you own a business or are interested in starting one, a secured loan can provide financial assistance. Every business requires initial capital or continuous investments, and secured loans can provide that without the strict requirement of regular business loans.   

Requirements for secured loans from alternative lenders  

To provide an opportunity that traditional lenders don’t, alternative lenders focus on what your collateral offers. With Alpine Credits, the eligibility criteria are more reasonable.   

  • Sufficient amount of equity—for alternative lenders who are lending based on your home equity, you need to have the minimum amount of equity to be approved for a loan. Alpine Credits require a minimum of 25%.   
  • Loan-to-value ratio—alternative lenders want to ensure you can manage another financial obligation. Getting approved may be challenging if your loan-to-value ratio exceeds 75%.   
  • Valid identification—lenders want to confirm two main factors with your ID. They want to ensure that the money is sent to the right person and that the borrower is the property owner.   
  • Appraisal of your collateral—getting your home happens outside the application process, but some lenders may offer appraisal services.

Alpine Credits’ home equity loans 

Alpine Credits offers specifically home equity loans, and applying for one is straightforward. Unlike traditional lenders, we do not require your income or credit score. To be eligible for a loan, you only need to own at least 25% of your home.  

  1. Submit an application—many lenders allow you to apply online, but you may choose to walk in or call if you prefer.  Gather the proper documents, including proof of ownership or identification. 
  2. Wait for approval results—as long as you own your home, you can get approved in as little as 24 hours. Alpine Credits processes applications faster than traditional lenders, allowing you to access funding significantly sooner.  
  3. Use funding—you’ll find the money in your bank account within three days of getting approved. You can use the money as soon as you receive it.  
An illustration of how home equity works.

You can calculate the value of your equity by subtracting your outstanding mortgage balance from the appraised value of your home. If you have paid for at least 25% of your home, you can borrow against this equity.  

Alpine Credits has been helping Canadians access their home equity as a form of financing for over 50 years. The potential of home equity loans can open new opportunities and help you achieve your financial goals.   

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Frequently asked questions

Alpine Credits offers one of the best financing options for homeowners in Canada. The main eligibility factor for a home equity loan is the amount of equity you have. You can qualify if you own at least 25% of the equity of your home

The minimum credit score may vary between lenders and traditional financial institutions, but you’re likely to qualify if you have a score of at least 650. If your credit score falls below the minimum, you may find a better lending opportunity with alternative lenders.

Many different lenders can provide a loan to you despite poor credit scores. One option is a home equity loan since they’re more accessible regardless of your credit score. They’re also quicker to access than traditional loans

You can start the journey to a score of 700 by completely repaying your outstanding balances. One common way to increase low credit scores is by taking out a debt consolidation loan from your home equity.